M&M promoters raise stake to 25%-plus

Keep themselves open for creeping buys, offers under new takeover code.

The promoter group of automaker Mahindra & Mahindra Ltd has raised its stake to over 25 per cent. According to the latest shareholding data filed with the Bombay Stock Exchange, the promoters hold 25.18 per cent stake as of September 30 against 24.86 per cent held at the end of the previous quarter.

The promoter stake fell below 25 per cent in December 2010 and has since remained below that level, despite occasional market purchases/sales by the group entities. The latest stake increase was done through Prudential Management Services, one of the holding companies.

Prudential, which held only 20 shares at the end of the last quarter, now holds over six million shares or 0.98 per cent in the company. Of these, 4.1 million shares or 0.68 per cent came from another holding firm Ridge Business Centre, resulting in a net stake increase of 0.3 per cent.

Some 55 entities including Anand Mahindra, Keshub Mahindra, family members, companies and trusts hold 154.5 million shares or 25.18 per cent in the company. At the end of the last quarter, the same entities held around 152 million shares.

Even after this increase, Mahindra’s promoter stake is among the lowest among major listed firms.

According to the Achuthan committee report, the mean promoter holding of large listed companies was over 55 per cent.

The increase assumes significance as under the new takeover code, promoters need a minimum of 25 per cent to be eligible to make creeping acquisitions and voluntary open offers.

The Takeover Code 1997, in force at present, allows promoters who have 15 per cent or more stake to increase their holdings by five per cent every financial year without making any open offer, under the creeping acquisition route.

Under the new norms, which will take effect on October 22, creeping acquisition will be available for promoters only if they hold 25 per cent or more, the new trigger limit. Creeping acquisition is an important weapon for promoters to consolidate holdings without the burden of open offers and discourage hostile takeover attempts.

Further, the new code also provides for a voluntary open offer by promoters to consolidate their holdings. Even this offer, which can be for a minimum of 10 per cent stake, can be made by promoters only if they have a minimum holding of 25 per cent, according to the takeover panel recommendations, making the number all the more important for promoters.

The Mahindra promoters also reclaimed a significant portion of their pledged shares. Shares pledged by them came down to eight million from over 12 million in the last quarter. Only five per cent of the promoter holding, which adds up to 1.3 per cent in the company, is pledged now -- down from 7.88 per cent pledged in the last quarter.